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Commentary

1-800 Contacts Anticompetitive Ruling Shows Need To Tame Search

1-800 Contacts entered into illegal agreements with other contact lens sellers to reduce competition in its industry, the Federal Trade Commission (FTC) ruled.

Internet advertising still
seems pretty wild, even after decades of use. At least one search marketer I contacted believes 1-800 Contacts secretly bullied its competition, but it’s not clear how that went down. There are
few government restrictions and independent companies believe they can police themselves.

The FTC ruling accused the retailer of agreeing not to bid for keywords in search ads that
might inform consumers of lower prices. The deal also means not bidding on other keywords, depending on the query, in order to keep the cost per clicks (CPCs) low.

“In a statement to the
media, 1-800 Contacts disputed the FTC's finding and said it would appeal,” according to Consumer Affairs. “The company may file a petition for
review of the Commission opinion and final order with a U.S. Circuit Court of Appeals within 60 days of the order being issued.”

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Evidently, the case dates back to August 2016. A year
later, an administrative law judge issued a ruling, which found that agreements limiting search engine advertising were unfair methods of competition, according to one report.

The FTC ruling
orders 1-800 Contacts to cease and desist and requires the company to refrain from entering into any future agreements with competitors that might restrict search advertising or limit participation in
search advertising auctions.

The National Law Review reported that 1-800 Contacts sued several competitors for trademark infringement when their ads often appeared when consumers
specifically searched for 1-800 Contacts. The case was eventually settled, and the FTC contends that the resulting settlement agreements constitute anticompetitive behavior.

This really stems
from the consumers' inability to compare prices in search engine queries. “The FTC’s decision affects not only the price that consumers pay for some contact lenses but also the very manner
in which substantial parts of price competition will occur throughout consumer markets,” writes Richard Newman, a FTC advertising compliance and regulatory defense
attorney, in an article on The National Law Review website. “Agency policy dictates accurate and intelligible price competition among those who compete for consumers’
dollars.”